All it takes to start is a great idea and a community to support you. Some of the mainstays that we know and love today – Uber, Poppy, Canva, all started by challenging giants in their respective industries.

These brands are often written off by their larger counterparts, but that is a mistake because these successful startups are what we call “Challenger Brands”. These types of companies have seen success in the last few years and continue to do so. But, what makes these companies successful and is there a repeatable process we can pinpoint for future entrepreneurs to follow?

After pinpointing a few very successful companies in this category we think that there is. And, in 2024 these brands are going to make some serious noise.

But, before we get to that, let’s cover the basics.

What is a Challenger Brand?

For this exercise, we’re going to define a challenger brand as a company or product that is not the market leader but competes against dominant brands in its industry. These brands challenge the status quo, offering innovative alternatives or revolutionizing the way their industry markets themselves.

Why are Challenger Brands Important?

The incredible thing about this category is that challenger brands are found in almost every industry.

Some recent examples include Dollar Shave Club in personal grooming, Warby Parker in eyewear, and Tesla in the automotive industry during its early days.

Challenger brands are crucial for several reasons. First off, they innovate and improve on industries that become stagnant. Success often comes to them because they offer a fun or unique alternative to the competition.

Second, they foster competition. By bringing fresh perspectives and solutions to old problems, they force mainstays in the market to try to compete by imitation or improving through other means.

And last but not least, they focus on customer experiences and values. Believe it or not, there are a lot of challenger brands that were born out of frustration from their creators.

Take Dollar Shave Club as an example. Their creator, Michael Dubin, got fed up with expensive blades that you could only buy at a grocery store. He decided to provide a cheaper alternative, ship it direct to customers through a subscription package, and even invested in their own blade manufacturer to make that happen.

Difference between Challenger Brands vs. Disruptor Brands

While both challenger and disruptor brands shake up existing markets, they differ in approach. Disruptor brands fundamentally change the way a market operates (e.g., Airbnb in hospitality). Challenger brands, on the other hand, compete within the existing market framework but seek to outperform or out-innovate market leaders.

Some disruptor brands that you might be familiar with include Canva, Uber, and Chime banking. Each of these companies took their respective markets and flipped them on their heads by offering something completely different from competitors.

Can you think of any challenger brands off the top of your head? If not, keep reading.

Bumble – A different way to date

Finding love is hard, and for years there were a few big players in the online dating space. Match.com and Plenty of Fish were some of the earliest players in the space and found some success. Then, when Tinder came onto the scene they became the new favorite by offering something different, a handheld experience that made finding “love” more accessible through a better user experience. Over time, Tinder’s reputation became something closer to an app solely used for “hooking up”.

With a bad image and the fact that it was bought by Match.com – Tinder was the same product in a different package.

Then came Bumble.

Bumble is one of the only dating apps not owned by the big guys and offered a different experience – one where women had the upper hand and the ability to send a message first.

They targeted the market leader’s bad reputation and created a product and messaging that attracted customers away from Tinder and into their own app.

Native Pet – a Better Dog Food Brand

Another brand that has a special place in our hearts, and in our dog’s belly is Native Pet.

Did you know that a majority of the big pet food brands that you know today are owned by Nestlé (owns Purina PetCare), Mars (yes, the chocolate company) has a Petcare division and Procter & Gamble ?

One of the biggest reasons is that dog food is often made with byproducts from human food production. That means that if the food isn’t good enough for humans it gets repurposed into the kibbles our dogs eat. Plus, a bunch of additional fillers are added which end up being very unhealthy for our pets.

Native Pet is one brand that wanted to change that. Created to combat the big guys, Native Pet uses human-grade, natural ingredients to keep our pets healthier.

Not only is their product much cleaner than the big guys in the industry, they’ve also differentiated themselves from others in the pet section by their packaging design.

While others have pictures of pets frolicking, they’ve chosen to go with simple, line-drawn pets to symbolize the simple ingredients included in their products. We’ve talked before about differentiating your brand with packaging, and Native Pet does a great job of this.

And, this challenger brand has an ethos behind it that drives everything that they do – Our pets deserve better. The care they have for their customer’s pets resonates far and wide and keeps buyers coming back.

Relationship between DTC and Challenger Brands

Direct-to-Consumer (DTC) models are commonly used by challenger brands. By selling directly to consumers, these brands can control the customer experience, gather valuable data, and build brand loyalty without the intermediaries.

Because challenger brands set out to give industry leaders a run for their money, oftentimes selling directly to consumers is a lot easier. Small companies will never be able to compete with the advertising budgets that the giants have so instead of throwing money on the fire they do something better. They create communities.

Seriously, they invest in organic methods to grow their products and create fanatics by selling good products. When you have a good product, people will tell their friends and continue to buy from you until you no longer do so.

In 2023, challenger brands faced numerous challenges, including economic uncertainties and increased competition. But, we’re looking to the future and that’s why we think that 2024 is going to be the year of the challenger brand.

2024 – The Year of the Challenger Brand

Looking ahead to 2024, we think there are a few reasons that challenger brands will see renewed success:

• Technological Advances: Continued innovation in areas like AI, machine learning, and data analytics gives challenger brands tools to understand and serve their customers better. Plus, content creation and the management of daily tasks can get easier without having to add additional manpower.
• Changing Consumer Preferences: There’s a growing demand for personalized, authentic, and sustainable products, which challenger brands are well-positioned to provide. It’s hard for established brands to suddenly pick up a cause to root for, it can seem disingenuous. Where challenger brands have the upper hand is the fact that most of the time, they’re created with a cause as one of their driving forces.
• Market Dynamics: Post-pandemic recovery and steadily increasing consumer spending means that there is more room for challenger brands to capture market share.
• Increased Investment: With a growing recognition of their potential and interest rates primed for a decline, investment dollars are going to become more readily available. We expect challenger brands to see increased investment and support.

Conclusion

2024 is shaping up to be an exciting year for challenger brands. With their innovative approaches, customer-centric models, and adaptive strategies, these brands are not just challenging the giants but are set to redefine market landscapes. Keep an eye on these dynamic players as they shape the future of business.

Are you a burgeoning brand looking for a creative team to help you grow? Reach out to us for a free consultation to see if we’re a fit.